The greener a company, the more profitable. This is at
least, what many investors believe these days.
The SEC knows that, and issued a guidance for companies last
year that identifies risks related to climate change material
such as energy waste, carbon emissions and other polluting
But the problem is that not all companies seem to have the
same understanding of what to disclose and how to do it.
As a result, CERES, a network of investors, public interest
groups and environmental groups, came out with a report
entitled Disclosing Climate Risks and Opportunities
in SEC Filings: A Guide For Corporate Executives, Attorneys and
Directors on Friday, February 25, to help companies
understand how to be more transparent and to reach a certain
quality standard in their disclosure of climate change risk
related material. At the same time, it shows investors how to
identify risks and opportunities.
The Ceres report helps clarify what is going on and
gives a nice framework to help to identify, disclose and
understand what the real risks are, says Bruce M. Kahn,
Senior Investment Analyst at Deutsche Asset Management that has
over $700 billion under management. The key to disclosure
is specificity and accountability.
The report states that some companies such as Siemens and
Xcel Energy did a satisfying job in disclosing climate change
related material, whereas American National Insurance Company
and Dean Foods Company were short on providing sufficient
information. It also includes steps for companies on how to
improve corporate disclosure in annual 10-K filings.
This will involve additional costs for companies related to
climate change coverage to corporate insurance policies or
consulting fees on how to deal with the new requirements, as
Institutional Investor reported. Companies should bear in
mind that climate risk is but one of many environmental, social
and governance (ESG) risks that have financial
impacts, says Mindy Lubber, president of CERES, in the
Companies have had to disclose material risks, such as law
suits, since the 1940s. The SEC guidelines and other reports
and studies released by Deutsche Bank, CERES or the consulting
firm Mercers underline the increasing importance of including
climate change as a material disclosure, since it can impact
investment portfolio risks. This is just lending more and
more credence to the idea that climate change is a material
risk and needs to be disclosed, Kahn says.